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Thursday, January 24, 2013

How regulation of attorney advertising can distort the market and hurt consumers

Public Citizen is filing comments tomorrow with the Tennessee Supreme Court opposing proposed rule changes to the legal ethics rules there governing attorney advertising. The current rules already prohibit false and misleading advertising; the proposals would go much further and ban a host of specific advertising techniques, including the use of celebrities, the use of recorded sounds, and even specific types of statements, including truthful statements about an attorney's own record.

At first glance, attorney advertising may look like something consumer advocates should want to regulate as much as possible because of the danger that unscrupulous lawyers could mislead unsuspecting clients. But there needs to be a balance. Though ads can manipulate and mislead, they can also inform people of their rights. Additionally, restrictions on advertising can shut smaller or newer providers out of the market by diminishing the effectiveness of their message. The result is less competition in the market for legal services. Bar rules that prohibit false and misleading content specifically are one thing. But restrictions on sounds, celebrities and the conveyance of truthful information or opinion are something else: they reach ads that aren't misleading at all and in fact seem to be aimed not at sneaky advertising techniques but effective ones.

Compounding the fear that this particular proposal in Tennessee is motivated by something other than consumer protection is a provision in the proposed rules that would ban advertising completely by lawyers without offices in Tennessee -- such as a lawyer with a multi-state practice whose office is located in the Arkansas or Mississippi suburbs of Memphis. Why should the bar want to ban such advertising? The proposal comes right out and admits the goal is economic protectionism: the proponents tout the out-of-state ban because it "prevents out-of-state attorneys from taking
business out of Tennessee." (Public Citizen's comments oppose the new rules for this reason as well as the First Amendment.)

Ultimately, the market will work best for consumers if they have more options to choose from and more information with which to make that choice. When advertising restrictions go beyond false and misleading communications and start cutting into truthful information and advancing efforts to stifle competition, the result is bad for consumers.

Comments

Two points.

First, you say that "bar rules that prohibit false and misleading content specifically are one thing," suggesting that bar rules that establish those prohibitions are okay. But why? Every state's law already prohibits false and misleading advertising, so there's no need for those bar rules.

Second, though I agree that bar advertising rules can harm consumers by keeping prices high, and otherwise keeping information out of consumers' hands, those rules have fairly small anti-competitive effects. The far bigger problem is the restrictions on practicing law (generally must be a bar member, must graduate from an accredited three-year law school, must pass a bar exam, etc.). Why not go after those far more significant barriers to competition?